Some aspects of optimal unemployment insurance

Baily, Martin Neil

doi:10.1016/0047-2727(78)90053-1

Cited by 469 publications

(457 citation statements)

References 11 publications

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“…Our hope is that this paper, by underscoring its usefulness as a welfare statistic, may lead to greater interest in reservation wage evidence, much as Baily's (1978) theoretical contribution led to empirical research on how much con-sumption declines when workers lose their job (Gruber, 1997). Ultimately, the two tests are complementary.…”

Section: Introductionmentioning

confidence: 95%

“…The goal of this section is to link our model with existing tests for optimal unemployment insurance which are based on the response of consumption to becoming unemployed (Baily, 1978;Gruber, 1997;Chetty, 2005). To do this, we return to the benchmark model of Section 2 and show how we can use the full structure to derive a test linking the decline in consumption during an unemployment spell to risk aversion and the elasticity of unemployment duration with respect to benefits.…”

Section: A Consumption-response Testmentioning

confidence: 99%

“…It is simply a question of how the elasticity is defined. Turning now to point (ii), Baily's (1978) original analysis and Gruber's (1997) subsequent work is based on a static analysis. These papers focus on the discrete drop in consumption between employment and unemployment.…”

Section: Workers With Liquiditymentioning

confidence: 99%

“…These papers focus on the discrete drop in consumption between employment and unemployment. For example, in his empirical implementation of Baily's (1978) test, Gruber (1997 uses PSID data to look at the drop in food consumption for a worker who is employed in year t and unemployed in year t+1. In his dynamic analysis, Chetty (2005) develops a version of Baily's test that suggests looking at the difference in the average marginal utility between employment and unemployment over the worker's entire lifetime.…”

Section: Workers With Liquiditymentioning

confidence: 99%

“…Within the public finance literature, the standard approach to measuring optimal unemployment insurance is based on the Baily (1978) test: "The optimal unemployment insurance benefit level is set when the proportional drop in consumption resulting from unemployment, times the degree of relative risk aversion of workers (evaluated at the level of consumption when unemployed) is equal to the elasticity of the duration of unemployment with respect to balanced budget increases in UI [unemployment insurance] benefits and taxes. " (p. 390) While this approach is close in spirit to the one we adopt here, we see several advantages to our test.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation

Shimer¹,

Werning²

2006

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This paper studies the optimal timing of unemployment insurance subsidies in a McCall search model. Risk-averse workers sequentially sample random job opportunities. Our model distinguishes unemployment subsidies from consumption during unemployment by allowing workers to save and borrow freely. When the insurance agency faces a group of homogeneous workers solving stationary search problems, the optimal subsidies are independent of unemployment duration. In contrast, when workers are heterogeneous or when human capital depreciates during the spell, the optimal subsidy is no longer constant. We explore the main determinants of the shape of the optimal subsidy schedule, isolating forces for subsidies to optimally rise or fall with duration.

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Section: Introductionmentioning

confidence: 95%

Section: A Consumption-response Testmentioning

confidence: 99%

Section: Workers With Liquiditymentioning

confidence: 99%

Section: Workers With Liquiditymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation

Shimer¹,

Werning²

2006

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The effect of social security benefits on food insecurity at the early entitlement age

Singleton

2022

Applied Eco Perspectives Pol

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This study examines the effect of Social Security benefits on food security at the early entitlement age (EEA). The data come from the supplements of the Current Population Survey, years 2001 to 2017. The results show that Social Security benefits decreased food insecurity near the EEA, particularly during and after the Great Recession. Specifically, the rate of very low food secure decreased discontinuously at the EEA by approximately 0.94 percentage points, a 6.6% drop from a rate of 15.1% at age 61. The results are especially large and robust for widowed householders.

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Health benefits of social insurance

Noghanibehambari

Salari

2020

Health Economics

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This paper studies the potential positive externality of unemployment insurance (UI) on infant birth outcomes. Taking advantage of variations of UI benefits across states and over time, we find that UI improves birth outcomes, including mean birth weight, full-term birth weight, low birth weight, fetal growth, and preterm birth. If all states apply the UI schedule of the most generous state (Massachusetts), the average birth weight increases by roughly 19 g.

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Some aspects of optimal unemployment insurance

Cited by 469 publications

References 11 publications

On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation

On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation

The effect of social security benefits on food insecurity at the early entitlement age

Health benefits of social insurance

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